Is a down payment the only thing keeping you from purchasing a home?
For many young or first-time buyers, the thought of coming up with 20% to put down on a home is daunting. When you don't have equity from an existing home's sale to help improve your down payment amount, you are forced to save the entire amount. But before you assume that you have no option but to come up with 20% before entering the home buying market, you should know that there are other options available to you. Here are some of them.
Low Down Payment Loan Options
The first place to look is with some of the many low down payment loan options available for you. It's actually no longer true that you have to have a 20% down payment to buy a home. For first-time buyers especially, quite a number of programs are available to help you get past this hurdle.
The first place to look is with government-backed loans. Government-backed loans are guaranteed, at least in part, by a government agency, such as the Federal Housing Administration, USDA, or the VA. By purchasing a home using one of these loans, you put the lender at less risk, and thus the lender is willing to take on a loan with less down payment.
The FHA-backed loans allow you to pay as little as 3.5% down. You will have to pay mortgage insurance, but you won't need 20% down. If you or your spouse is a qualified service member or veteran, you can get a home for no down payment at all through the VA home loan program. While you pay a funding fee, that fee can be rolled into your loan and isn't much. The USDA also allows those buying in non-city areas the option to buy with no money down through the USDA home loan program.
You can also get a conventional loan with less than 20% down if your credit is fairly good. Some lenders will offer loans for as little as 3% down, and a few will allow select borrowers to burrow the full cost of the home. Keep in mind that you will pay mortgage insurance in this case as well.
If you choose a loan program that requires mortgage insurance, you aren't necessarily stuck paying that amount for the life of the loan. You can ask for it to be removed or refinance the home when property values change and you no longer own more than 80% of the home's value. Also, certain loans will automatically drop the insurance after a set number of years.
Friends and Family
If you have trusted friends and family who have access to money, you may be able to set up a loan for the down payment amount. However, a loan, even if it's from family, needs to be documented, and your lender will ask for that documentation. It may change your debt-to-income ratio, which may lower your borrowing power. Still, this can be an effective way to get the money you need for a down payment.
If your friends and family wish to give you a gift, you will need documentation that the gift was, in fact, a gift, and that the giver had the money to make the donation. However, if you have friends and family willing to do this for you, the gift won't lower your borrowing power. That said, some lenders are hesitant to lend to customers who have no money at all of their own to put down. One of the reasons lenders ask for a down payment is the fact that it shows the borrower is disciplined enough to save money for a major purchase, and that shows financial stability.
Local or State Down Payment Assistance Programs
Every single state has some sort of a program to help first-time or low-income buyers get the money they need for their down payment. While making a list of these programs isn't possible because they change regularly, it can be an option for some homebuyers. It may be location specific or borrower specific, so you will want to talk to your potential lender or your real estate agent about the possibilities in your area. However, make sure you look into all of these possibilities before assuming you can't afford a down payment.
Kentucky: Kentucky Housing Corporation
Tennessee: Tennessee Housing Development Authority
As you can see, there are options for those who don't have the moony upfront for a 20% down payment. If you're ready to enter the home buying market, and don't think you can save quite enough for a down payment, you have options! Talk to your lender or your agent about those options, and start looking for your new home.
Purchasing a new home is an exciting milestone in your life — but it also can be an intimidating responsibility. Most buyers put an offer on a home that appeals to them for a variety of different reasons, whether it's the location or the features inside the home or the land that surrounds the house. After their offer is accepted, they rely on the advice and insight of a home inspector who provides them with more details about the health of the home.
Despite the fact that buyers do their homework prior to closing on their new home, many are left with unexpected issues after the closing. There's so many anecdotes about buyers whose basements flood the day after they move in or who are faced with an HVAC system that doesn't work once summer arrives.
A home warranty may be able to provide some security and peace of mind, but these protection plans can carry with them a high price tag. This leaves many buyers wondering if they are really worth it?
Here's how you can decide if a home warranty is right for your home purchase:
Consider the Benefits of a Home Warranty
A home warranty provides an extra layer of protection for buyers who may have used much of their cash to fund the purchase of a home. Most people are not prepared to put out a significant amount of money for repairs and replacements immediately after closing on a house, so a home warranty protection plan may be appealing.
When a repair is covered by a home warranty, the homeowner is able to quickly call a representative who can provide a list of recommended contractors to complete the job. This can expedite the repair process, which minimizes the inconvenience to the new homeowner.
Home warranty benefits are renewable. Homeowners who invest in a home warranty plan can extend the benefits past the first year, which allows them to take advantage of benefits in the years to come.
Home warranties typically cover the repair and replacement of major appliances that often experience issues. Kitchen appliances, such as the refrigerator, and HVAC systems are commonly covered under home warranty plans. The costs of these replacements is significantly higher than the warranty plan itself, so many home buyers find it worth it to purchase a plan based on this fact alone.
Recognize the Disadvantages of these Protection Plans
Home warranty plans will typically only cover a repair if the homeowner uses one of their previously-approved contractors. This limits who can be contacted to complete the repair, and homeowners who use a contractor that was not approved by the warranty company likely won't get coverage for the repair or replacement.
Some policies limit the amount of coverage the individual will receive. If a homeowner has a particularly bad year with several significant repairs, they may not receive additional coverage if their quote has been met. Many plans cap coverage between $1,500 and $2,000.
Home warranty policies are notorious for their fine print. Home buyers who are considering purchasing one of these protection plans need to read the fine print carefully in order to fully understand what their coverage will be. For example, some repairs are only covered under specific circumstances that are outlined in the policy. If the failure of the equipment is the result of a circumstance that is not identified, it likely won't be covered under the home warranty.
Buyers who want the peace of mind that comes along with a home warranty but don't want to pay hundreds of dollars for the protection may consider using it as a negotiation tool. Many sellers are willing to include a home warranty with the purchase of a home, particularly if the home inspection highlights issues that may become larger problems in the future. For them, it might be cheaper to purchase a home warranty than to fix the potential problem. Sellers are able to appease the buyer and move forward with the purchase agreement, while buyers are able to rest easy knowing that they have the protection of a home warranty plan if an unforeseen issue arises shortly after the purchase of the property.
Ultimately, it's up to the individual buyer to determine whether a home warranty is worth the cost. Find out more about home warranty plans and the protection that these plans offer by contacting a real estate agent today.
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The American Mortgage Golf Outing at O’Bannon Creek benefiting Make-A-Wish Ohio, Kentucky and Indiana hopes to raise enough funds to grant 3 wishes for our local children battling life-threatening illnesses.
Monday, July 24 2017
Golf starts at 12pm
Dinner Immediately after Golf
O'Bannon Creek Golf Club
6842 Oakland Rd
Loveland, OH 45140
$1600 per Foursome
Max 25 teams
Click here to sign up
We will supply lunch and a formal dinner where a wish child will tell her own story and experience with the organization. Please help us in supporting this mission and the families in our community.
More information can be found here http://www.mikefarrellmemorialgolfouting.org/
If you're thinking about buying a house or refinancing a loan, you probably know the sobering realities in the mortgage market: thanks to strict federal rule changes in the wake of the housing bust, it can be tough to qualify for a loan.
That's especially true if you don't quite fit the mold — you don't conform to all the underwriting mandates on credit, income, debt-to-income ratio and other criteria. You can handle the payments, but issues in your credit history and application push borrowers “outside the box” that defines Qualified Mortgages, or “QM”.
That being said, a small but growing number of lenders have begun offering mortgages with more flexible terms designed for borrowers that don’t meet the stringent requirements set up by the Consumer Finance Protection Bureau. Borrowers with solid credit scores and/or money in the bank but that student loans or uninsured medical bills push debt-to-income ratios over the maximum that federal rules generally prescribe have programs open to them.
Self-employed borrowers have options, as well as anyone who did a short sale on their underwater home a couple of years ago too recently to meet the four-year minimum wait time prescribed by Fannie Mae or Freddie Mac before you are allowed to obtain a new mortgage.
Borrowers may choose to wait until their credit improves, their job is stable, or the prescribed waiting period is over. But another option for "near-miss" applicants or potential applicants nationwide has begun taking shape: "non-Qualified Mortgage" or non-QM lending. Interest rates are higher than the standard market, but certain programs are being created to help certain borrowers – and that helps the housing market.
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